Negotiation (Sections 30-50) Flashcards
How are ordered and bearer instruments negotated?
Ordered instruments are negotiated by means of indorsement and delivery, while bearer instruments are negotiated by mere delivery.
What is the rule with indorsing the instrument entirely?
The indorsement must be an indorsement of the entire document. An indorsement which purports to transfer to the indorsee a part only of the amount payable, or which purports to transfer the instrument to two or more indorsees severally, does not operate as negotiation of the instrument. But where the instrument has been paid in part, it may be indorses as to the residue.
What are the different kinds of indorsement? Explain each briefly.
(1) Special indorsement - specifies the person to whom, or to whose order the instrument is to be payable.
(2) Blank indorsement - specifies no indorsee, and is regarded as an instrument payable to bearer, and may be negotiated by delivery.
(3) Restrictive indorsement - is an indorsement that either (a) prohibits the instrument from being negotiated further, (b) constitutes the indorsee to be an agent of the indorser, (c) vests the title in the indorsee in trust for or to the use of some other persons.
(4) Qualified indorsement - constitutes the indorser a mere assignor of the title.
(5) Conditional indorsement - The party required to pay may disregard the condition and make the payment, whether the condition has been fulfilled or not. But any person to whom an instrument so indorsed is negotiated, will hold the same, or the proceeds thereof, subjects to the rights of the person indorsing conditionally.
How can a holder convert a blank indorsement to a special indorsement?
The holder may convert a blank indorsement into a special indorsement by writing over the signature of the indorser in blank any contract consistent with the character of the indorsement.
What is the rule when a bearer instrument is indorsed specially?
When an instrument, payable to bearer, is indorsed specially, it may nevertheless be further negotiated by delivery, but the person indorsing specially is liable as indorser to only such holders as make title through his indorsement.
What is the rule when an instrument is payable to two or more persons?
Where an instrument is payable to the order of two or more payees or indorsees who are not partners, all must indorse unless the one indorsing has authority to indorse for the others.
When is an instrument continued to be negotiable?
An instrument negotiable in its origin continues to be negotiable until it has been restrictively indorsed, or discharged by payment or otherwise.
What is the rule when it comes to striking out indorsement?
The holder may at anytime strike out any indorsement which is not necessary to his title. The indorser whose indorsement is struck out, and all indorsers subsequent to him, are thereby relieved from liability on the instrument.
What if an instrument is transferred without instrument? What is its effect?
Where the holder of an instrument payable to his order transfers it for value without indorsing it, the transfer vests in the transferee such title as the transferor had therein, and the transferee acquires in addition, the right to have the indorsement of the transferor. But for the purpose of determining whether the transferee is a holder in due course, the negotiation takes effect as of the time when the indorsement is actually made.
What is the rule when an instrument is negotiated back to a prior party?
Where an instrument is negotiated back to a prior party, such party may, subject to the provisions of this Act, reissue and further negotiable the same. But he is not entitled to enforce payment thereof against any intervening party to whom he was personally liable.
